Good morning and welcome to Getty Realty's Earnings Conference Call for the Third Quarter of 2021. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker.

Thank you, operator. I would like to thank you all for joining us, for Getty Realty's third quarter earnings conference call. Yesterday afternoon, the company released its financial results for the quarter ended September 30, 2021. The Form 8-K and earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events and uncertainties, that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2021 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's response to the COVID-19 pandemic, future company operations, future financial performance and the company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2020 and subsequent quarterly reports filed on Form 10-Q and our other filings made with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of Adjusted Funds From Operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.

Thank you, Josh. Good morning, everyone. Welcome to our earnings call for the third quarter 2021. With Josh and me on the call today are: Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will lead off today's call by providing an overview of our performance for the third quarter of 2021, and highlight the company's investment and capital markets activities. And then, I'll pass the call to Mark and Brian to discuss our portfolio and financial results in more detail. The net result of our well positioned in-place portfolio and the continued execution of our active and accretive investment program was a 5.8% increase in total revenues, a 13.2% increase in Adjusted Funds From Operations, and a 6.4% increase in AFFO per share. The company benefited from this ability of its portfolio of convenience and automotive retail assets, which continue to perform well, meaning that we had another quarter of full rent collections, including all amounts owed to us as a result of our 2020 COVID-related rent deferrals. The success of our investment strategies year to date has been a key contributor to our earnings growth. We invested $61.1 million in 25 properties during the quarter. And another $8.8 million just after quarter end, bringing our year to date total investment activity to more than $144 million. This accelerated pace of investment activity was highlighted by our ability to bring new high-quality tenants into our portfolio, including Flash markets, with sites located across the Southeastern U.S. and Flash Car Wash, whose footprint spans the Northeast. We also continue to successfully execute on our multiple investment strategies, which include which include traditional sale leasebacks, accretive acquisitions of net lease properties and development funding for new-to-industry assets. In addition, rent commenced on 3 redevelopment projects during…

Thank you, Chris. As of the end of the third quarter, our portfolio includes 1,011 net leased properties, 5 active redevelopment sites and 5 vacant properties. Our weighted average lease term was approximately 8.8 years. And their overall occupancy, excluding active redevelopments, remains constant at 99.5%. Our portfolio spans 36 states across the country plus Washington D.C. And our annualized base rents, 63% of which come from the top 50 MSAs in the U.S., continue to be well covered by our trailing 12-month tenant rent coverage ratio of 2.6 times. In terms of our investment activities, we had a highly successful quarter in which we invested $61.1 million in 25 properties. Subsequent to the quarter-end, we acquired 2 additional properties for $8.8 million, bringing our year-to-date investment activity to $144.5 million across 82 properties. We completed 2 transactions in the Convenience & Gas sector during the quarter. The first was a 15-property sale leaseback with Flash Market, a subsidiary of Transit Energy Group. In this transaction, we invested $35.1 million to acquire the properties, which are located throughout the Southeast United States with a concentration around the Raleigh, Durham, North Carolina MSA. Properties acquired have an average store size of 3,600 square feet and an average property size of 1.7 acres. In addition, 53% of the properties have sub-tenancies with either quick serve restaurants or auto service operators. We also completed our first development funding project with Refuel in the Charleston, South Carolina MSA. Our total investment in the project was $4.5 million, including our final investment of $1.1 million during the third quarter. As per the terms of our development funding transactions, we acquired the property upon completion of development in conjunction with our final funding payment and simultaneously entered into a long-term triple net lease. In the car…

Thanks, Mark, good morning, everyone. Let me start with a recap of earnings, AFFO, which we believe best reflects the company's core operating performance was $0.50 per share for the third quarter representing a year-over-year increase of 6.4%. FFO was $0.48 per share for the quarter. Our total revenues were $40.1 million representing a year-over-year increase of 5.8%. Rental income, which excludes tenant reimbursements and interest on notes and mortgages receivables were 7.5% to $34.3 million. Strong acquisition activity over the last 12 months and recurring rent escalators on our leases for the primary drivers of the increase with additional contribution from rent commencements and completed redevelopment projects. On the expense side, G&A costs increase in the quarter primarily due to employee-related expenses, including non-cash stock-based compensation. Property costs decreased marginally due to reduction of real estate tax expense and environmental expenses, which are highly variable due to a number of estimates and non-cash adjustments increased in the quarter due to certain legal fees and changes in net remediation costs and estimates. Return to the balance sheet, and our capital markets activities, we ended the quarter with $567.5 million of total debt outstanding, including $525 million of long-term fixed rate unsecured notes and $42.5 million outstanding on our $300 million revolving credit facility. Our weighted average borrowing cost was 4% and the weighted average maturity of our debt was 6.3 years. In addition, our total debt to total market capitalization was 29%. Our total debt to total asset value was 37%. And our net debt-to-EBITDA was 5.1 times. Each of these leveraged metrics are calculated according to the definitions in our loan agreements. As Chris mentioned, yesterday we announced the amendment and extension of $300 million revolving credit facility, which is now set to mature in October 2025 with 2,…

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brad Heffern with RBC. Please proceed with your question.

Hey, good morning, everyone. Thanks for taking the questions. On the acquisition front, I was just wondering if you could talk through how deal flow looks right now. Obviously, the $61 million number was pretty robust. So, do you think that that's a sustainable run rate number or how are you viewing that?

Yeah, this is Mark. I can comment on, our pipeline as I mentioned in the comment is very healthy. We're very happy with where it is. The flow of opportunities we're seeing and weren't full underwriting is ahead of where it was this time last year. So we continue to grow our opportunity sets and our relationships in all the retail verticals that we've now expanded to. So, I would say that we're pretty happy with what we have to look at and we look forward to reporting on more as we go forward.

Okay. And then, I appreciate the increased disclosure on the escalators. I was curious for the CPI linked escalators, do those have caps? And then, the escalator guidance ticked up by 10 basis points is part of the reason that CPI linkage or any color you can give on that? Thanks.

Hey, Brad. It is Brian. The CPI, it's a small number of leases. One of them just happens to be some material dollar amount. So it's not the typical escalator clause, we have in the leases. But they do have floors and ceilings, for their collared, which is pretty typical when you have that structure. In terms of the tick-up, from the 1.6% to the 1.7%, you have the Flash Market deal, the transit deal that has 2% annual escalators. So that's probably the difference there again on the round. For the most part, I think what we're seeing in our associations and the deals we're closing are the structures that are in line with the majority of our deals, which are annual escalators, in the 1.5% to 2%, that range.

Okay, thank you.

Our next question comes from the line of [Lizzy Dorkin] [ph] with Bank of America. Please proceed with your question.

Hi, good morning, everybody. This is Lizzy on for Josh Dennerlein. I'm just curious to see if you guys can comment on any specific opportunities to accelerate redevelopment plans for 2022.

So we have a constant effort to deliver with the returns that we've reported, deliver as high volume and as faster pace as possible in redevelopment program. There are certain barriers to growing that materially from where we are today with respect to extracting properties from leases, marketing efforts, the entitlement efforts are always the challenge. The typical development hurdles that you experience in getting these projects through permitting and construction. So, I think right now, the pace we're on is about what we see, again, constant effort by the asset management team to call opportunities out of the portfolio, but there are certain restrictions and obstacles to significant growth to that pace.

Okay. And my second question is, how are your C-store tenants thinking about electric vehicles and working to capitalize on that trend? I don't know if you guys have any more insight into that, if that's becoming more of a hot topic?

Yeah, I think it's been a hot topic for several years now, with our operators who are on the ground. There are certain operators that are evaluating adding charging stations right at their properties. Now, just to caution everyone, that's not going to be a charging station in each and every property. But certain properties that lend themselves more towards longer commutes, or longer driving times, where a charging station really fits well. But the goal for our operators, right, it's to drive traffic not only to their locations for fueling or for charging, but for convenience store items and food, beverages. And what you've seen is sort of a concerted effort by tenants, right, with - we've talked about this in the past, membership programs or loyalty programs, right, to drive traffic to the location, whether again, it's charging or gas or adding a carwash on site, but most importantly, the food and the convenience store items within the store. But I think what you can expect in short, is that you'll start to see our operators, right, again, where it makes sense for them to add a charging station to that certain property.

Great, thank you.

Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Hi, thanks. Good morning. Just first question on the investments completed in the quarter, sorry, if I missed this. But can you just discuss the cap rate or the initial yields on those investments? And can you discuss sort of the environment in general around pricing, the competition that you're seeing and whether you're starting to see any reduction in yields or cap rate compression, as you move forward with future investments?

So, the market has been active in the verticals that we're targeting certainly, it's competitive, it's an attractive set of retail operations that the cap rates are compressing kind of coming out of last year, and certainly in through this year. We continue to acquire in that range of mid-6s to 7, the market for this product we're looking at. It's active, we feel we're competitive. I'm not sure, what the run rate will be here over the next few quarters of continued compression. But, I think, we're [priced at certainly in, I guess, buying some] [ph].

Okay. That's helpful. And then, I just wanted to follow-up on the rent escalators across the portfolio. So you commented, Brian, on the increase to 1.7% from 1.6%, you talked about Flash Market deal and some other deals are closing. Will CPI increases - I do expect CPI increases to have any impact on that 1.7% annual rent escalation in the near-term? I mean, do you expect to see that improve as we move into 2022 from that current annual rate?

I don't think, you'd see anything material there, Todd. What should we use the floor, right, of the collars on the CPIs in our calculation, and it's an every 3 year reset? Again, we're talking about our portfolio is really a handful, this is just one of them happens to be a larger unitary lease. And it's an every 3-year reset, and it's got the floor and it's got the ceiling. So, I don't expect that to have any significant impact on our operations here, as we sit here today.

Okay, got it. And then, just in terms of the balance sheet and funding investments, as we move ahead here, you've obviously utilize the ATM a little bit. Leverage ticked up just slightly 5.1 times, debt-to-EBITDA from 5 times last quarter. Can you just remind us, what the long-term target leverage level is for the company and sort of where you see that trending in the near-term?

Yeah, I think, we're at a really good position, when it comes to capital, just generally speaking, there's significant capacity on the revolver, significant headroom within leverage, we've typically guided in the 4.5 to 5.5 times allowing for opportunities to maybe tick up a little bit above that into the higher 5s, if it was appropriate, so sitting where we are at 5 times, 5.1, again, significant headroom there. And then, capital markets are broadly constructive. So, I think, we're in a place, where you'll see us execute as we have been will utilize the revolver, will utilize the ATM. And if there's an opportunity or a need to look for permanent capital, I think, as we sit here today, again, I think we have options and markets are broadly constructive to our asset class in our business.

Okay. All right. Great. Thank you.

Our next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with your question.

Good morning, everyone.

Good morning.

So with regards to the Flash Market deal, I guess, if you can provide some color on how that was sourced, why they were a seller of the real estate? And was that transaction, maybe typical of what you're seeing in the pipeline today for c-store deals?

Yeah, so specific to the Flash Market deal, obviously, they're an existing chain. They are in the process of acquiring some regional competitors. And the transaction was really a combination of sale leaseback on existing own sites, but also part of the overall acquisition, financing, again source direct for our team here, and pretty typical of what we've been able to do specifically in the C&G space, car wash space, and as we expanded the other asset classes in order to gain relationships, what we hope to do with as we broaden our investment.

So it sounds like it was kind of smaller M&A, I mean, is that something you're seeing accelerate or continue as we kind of look forward in 4Q maybe even 2022?

Well, I think just the asset classes that we're targeting C&G, car wash, auto service, those are asset classes that we've been saying or have been consolidating for a number of years now. And, again, this is sort of, what we did well right at this, partner with operators who are growing taking market share, right, becoming a dominant presence within their region or even nationally and establish a long-term partnership and we hope to do more with all these types of tenants over time as they grow their businesses.

I feel like remember it maybe this was pre-pandemic, it felt like pricing was getting kind of lofty and maybe slowing down some of that M&A, and kind of tenants and potential tenants. Is that been reaccelerating over the last couple of quarters?

No, I think, the pricing specifically on the very large transactions, right, was where we saw, there's a pretty high multiples again, this is talking about the operating businesses in the M&A context. Again, our comments on their field specifically, but our opportunities were much better to acquire either direct comp within a market or enter adjacent market at an attractive price. You gained scale specifically in C&G and car wash, right? There are certain synergies that are able to get realized in pretty short order. That certainly helps from operators pricing on the M&A side.

Okay. And then bigger picture, you kind of look back at how the portfolio - your portfolio is performed historically during periods of kind of rising gas prices, and as we kind of see gas prices kind of moving upward? Is that going to have any impact you think potentially on tenant credit, just - if there is some kind of pressure on visitation, and I know, they can kind of pass a lot of that pricing on to consumers, but historically, has there been any kind of impact on how tenants performed during periods of rising gas prices?

Yeah, certainly, rapid movements in the wholesale pricing rent has been a historically declining a retail margin environment. We have a slide actually in our investor presentation, which goes through kind of the change in retail margins over the last several years. And, I think, one thing you're seeing is, there has been a steady shift upwards in retail fuel margins over the last several years. And if you think about pricing and demand for fuel, we expect that trend to continue and be stabilized there at a higher level. I'm not trying to call specific cents per gallon margin, but just at a higher level on a permanent basis, I think, that's going to help our tenants pass along a lot of the higher cost to the consumer.

Okay, that's it for me. Thank you very much for the questions.

Our next question comes from the line of Wes Golladay with Robert W. Baird. Please proceed with your question.

Hey, good morning, guys. Can you talk about how the composition of the pipeline is changing? Is it more driven by new relationships maybe versus a few years ago? And then, obviously, making some progress on the car washes. But you did do a tire-store deal this quarter. So is that becoming a bigger part of the pipeline as well?

So, yeah, if you look back where we were a couple of years back, we were kind of a flat-footed store and carwash, and we grew that to a material part of our pipeline. The pipeline is still weighted towards gas convenience operators. That said, it's growing. So, both sides of the equation are growing. We started to make similar progress and inroads in the other verticals that we targeted, specifically, tire, lube centers, tire and battery, and all parts of auto service. So I think we plan or you should expect that we grow all those pieces of the pie at different paces, but grow certainly over the next couple of years. I think that many of our deals to your question on sourcing or composition, it's through the efforts of our investment acquisition team to both grow where it's appropriate, existing relationships, good relationships with our stronger tenants, and also to create new opportunities for not only geographic with tenant and category diversity amongst the portfolio. And I think we're kind of executing on all fronts there.

And, I guess, when we look at, I mean, your timing to build these relationships and you actually get into that, I mean, for that to translate into deal volume, is that a multiyear process, where - is it a linear growth? Or does it grow exponential maybe a few years later?

So, listen, I think we're looking for long-term relationships with strong operators and as their businesses grow, and they look to acquire - everyone is looking for to take the lumpiness out of all their programs. But there are ebbs and flows with all our tenant relationships, and in the pipeline. We just constantly manage those relationships, be ready to be a funding partner when appropriate. Some of these are deals that come up quickly. And there is a gap between the next deal, some are pretty steady state. So, the combination of all those relationship management, pipeline management, kind of fuels the program on an ongoing basis.

Okay. And then, you did mention selling some non-core assets. But, I guess, would you also be open to selling assets opportunistically, looking at the - I think you delivered 2 7-Elevens this quarter, and they have a pretty strong bid in the private market.

Typically, we've been, especially with our new developments, buy and hold investors. If you look at what we've been selling, right, it's been kind of underperforming assets across the portfolio. Just holistically, if we look at sort of all of our options, but again, I wouldn't guide you towards expecting significant asset sales of what we [decide for our holdings] [ph].

Okay, thanks. Thanks, guys.

[Operator Instructions] There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Great. Thank you, operator, and thank you, everyone for joining us this morning for our third quarter call. We look forward to getting back on with everyone. I think in late February, when we close out our fourth quarter and fiscal year 2021 And we appreciate your interest in the company.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.